“Unfortunately, the EU’s projections involve extremely wishful thinking. For one, they assume an impossible level of austerity: Greece must run an average budget surplus (excluding interest payments) of 3.4 percent of GDP for a decade, then 2.2 percent until the year 2060—something that no euro-area country with such a precarious economic history has ever done. Bringing those projections down to a merely improbable 2 percent and 1 percent, and using growth and interest-rate estimates from the International Monetary Fund, yields a very different picture: [Chart] […]

Over the next several decades, even in an optimistic scenario, Greece will have to borrow hundreds of billions of euros from private investors to pay off its official creditors. If those investors think the government’s debts are out of control, they’re bound to pull back—and Europe’s leaders will face yet another Greek crisis.

The obvious solution is for the EU to provide Greece with genuine debt relief. The sooner, the better.”

“With the northernmost euro member now set to become the bloc’s weakest economy, the question of currency regime continues to resurface as Finland looks for explanations for its lost competitiveness. Timo Soini, who is also the leader of one of three members of the ruling coalition, the anti-immigration The Finns party, says the country could have resorted to devaluations had it not been for its euro membership.”

“Varoufakis’s move to the background will increase the probability that a chilly stalemate will give way to another Band-Aid arrangement that allows Greece to muddle along for a little longer. But unless this time is used by the country’s creditors to accept a truth that Varoufakis consistently tried to impose — that Greek economic reforms, no matter how bold, won’t succeed unless the budget austerity conditions are relaxed and there is further debt relief — the finance minister could return to the front line.